Saturday, April 26, 2014

The Corporate Tax Regime In Canada Is Corporate Welfare

PricewaterhouseCoopers did its own analysis — a survey of the Canadian Council of Chief Executives' roughly 150 members. It was voluntary and only 63 replied. But of those who did, the survey found their businesses paid a total of $19 billion in corporate taxes, plus another $5 billion in various other charges and fees to various levels of government.

Okay, that's a voluntary survey, and doesn't give us the entirety of the picture.

The left-leaning advocacy group Canadians for Tax Fairness said they did an analysis of the top 60 companies listed on the Toronto Stock Exchange, and found only four companies paid the full corporate rate. More than half paid less than 10 per cent, and 13 firms paid less than five per cent.

But, let's take a look at how much was transferred out of Canada, shall we?

For example, in 2011, Canadian businesses invested $53.3 billion in Barbados, third only to the United States and the United Kingdom. By some estimates, the Canadian government is losing $80 billion a year in tax revenue due to this kind of profit-shifting.

Do you see anything wrong with this? I certainly do. What it boils down to is that the Corporate tax system in Canada has been gutted from the inside not just with a series of rate cuts, but also with a series of bookkeeping games that make it easier for corporations to shuffle money offshore before it appears on the bottom line ledger. (at least of the "official" set of books that CRA would see if they did an audit.

In response to this blatant tax dodging, we get the following patronizing response:

"Corporate Canada pays governments in lots of other ways. They pay different levels of governments, they pay property taxes and they pay a variety of fees and charges that in many cases actually exceeds what they pay in corporate income tax," said John Manley, head of the Canadian Council of Chief Executives

Oh gosh, they pay property taxes. You don't say. So do I ... your point is what? Oh, and those "fees" you mention - yeah, well, I get hit with those every time I contact the government too. I pay fees to register my car, my driver's license, on my utility bills for garbage pickup and water/sewer every time I make a transaction with the government in fact. Don't feed me a sob story about how hard done by you are with "fees" to the government.

"It's not right," Mr. Manley said. "But figuring out how to fix it without unintended consequences requires really smart people, and the Organization for Economic Co-operation and Development has been working at this for a very long time."

Mr. Manley said the Canadian Council for Chief Executives supports the OECD's efforts, but until the Canadian tax code changes, businesses have every right to take advantage of what the code allows.

"There is no one in Canada who wouldn't avoid paying a tax if there is a legal way to do it," he said. "It doesn't mean it's wrong to minimize your tax. It just means that governments have to get rules in place and make sure everyone is playing by them."

The issue is that governments have spent the last twenty years downloading the bulk of the tax burden onto middle income earners and telling us that they are "cutting taxes", when all they have been doing is playing to the sociopaths in charge of the large corporations. It's not small, privately held, corporations that are the problem here - it's the big entities who have the time and resources to invest in figuring out the next way to game the system or lobby the government into opening new loopholes for them to exploit.

Under the Harper Government, we have seen them consistently reduce the tax rates, downloading everything they can from the Federal level to lower levels of government, at the expense of individual Canadians. Just as we found in Alberta under Ralph Klein, yes the budget appears to be balanced, or even in a surplus position. Except that there is a growing deficit in other areas - infrastructure, social programs and the like - things which affect individual Canadians far more dramatically.

Lower taxes is a false economy - it does not result in more efficient government, nor does it "encourage investment". For the last couple of decades, the corporate world has used the "if you tax us too much we'll stop investing here" as a threat. It's time to call their bluff. Companies that want Canadian talent will stay here. Those that leave will open opportunities for Canadian companies to move into. It's time that we stopped acting afraid of the multinational corporations and told them pay their fair share.

1 comment:

Anonymous
said...

Even postage is subsidized - rather substantially. Despite all the doom/gloom that we've heard recently about Canada Post's financial state, corporate Canada gets hundreds of millions of indirect subsidy when it comes to bulk rate mailing. I had a guy trying to sell me on automated mailing / postage and he indicated that some packages would be anywhere from 25 to 50% less than sending the package manually, which is already reduced from standard consumer rates.